Prepaid Energy Leads to Significant Drops in Energy Consumption

Posted by Cindy O'Dwyer on March 21, 2013

Cindy O’Dwyer, Vice President, DEFG

DEFG, a consulting firm specializing in energy and consumers, launched the Prepay Energy Working Group in 2010 to explore the many critical issues presented by prepay service. Arguably, the most compelling area of study is the effect of prepayment on energy conservation and usage. The Prepay Energy Working Group engaged economist Michael Ozog, Ph.D., to apply statistical techniques widely accepted in the evaluation of utility-sponsored energy efficiency programs, to measure the effect of prepayment on energy usage. Consumer billing data obtained from Oklahoma Electric Cooperative provided a rich data set.

The major finding is that participation in prepaid energy service results in an average reduction in energy usage of 11%. That is a large number and is achievable without a significant outlay by the customer in equipment. Nothing in the current energy efficiency portfolio really compares to prepaid energy in regard to the size of the impact, speed and cost effectiveness. The 11% decrease, moreover, is attributable to usage reductions while service is connected and is not a consequence of service disruption. With an average monthly bill for Oklahoma Electric Cooperative's customers running $146, the 11% savings implies a $192 annual reduction in a customer's energy bill.

DEFG is finding that regular communication providing timely data, where usage is tied to dollars and cents, is key to affecting consumer energy consumption. Now it is possible to place day-to-day energy and account balance management directly in the palm of the consumer's hand. Prepaid energy relies on near daily communication and fits squarely with the incremental, anytime-anywhere payments consumers are rapidly growing accustomed to.

Cindy O'Dwyer is vice president of DEFG and lead for the Prepay Energy Working Group. For a copy of the report, you can contact her at codwyer@defgllc.com.

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